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Test your basic knowledge |
AP Microeconomics
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Subjects
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economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.
Demand for Labor
Perfectly inelastic
Economic Growth
Diseconomies of Scale
2. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Dead Weight Loss
Price elasticity
Total Fixed Costs (TFC)
Monopolistic competition long-run equilibrium
3. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.
Substitute Goods
Law of Increasing Costs
Economic Growth
Resources
4. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Determinants of Demand
Total variable costs (TVC)
Diseconomies of Scale
Dead Weight Loss
5. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Monopsonist
Production function
Increasing Cost Industry
Demand for Labor
6. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Subsidy
Perfectly competitive long-run equilibrium
Negative externality
Private goods
7. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price
Opportunity Cost
Producer surplus
Economics
Constant Returns to Scale
8. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Price inelastic demand
Total Fixed Costs (TFC)
Total variable costs (TVC)
Fixed inputs
9. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage
Absolute prices
Non-collusive oligopoly
Price Ceiling
Marginal Benefit (MB)
10. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good
Decreasing Cost industry
Spillover benefits
Price discrimination
Substitute Goods
11. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Determinants of Demand
Implicit costs
Monopoly
Oligopoly
12. The mechanism for combining production resources - with existing technology - into finished goods and services
Market Equilibrium
Marginal Resource Cost (MRC)
Production function
Scarcity
13. AVC = TVC/Q
Average Product of Labor (APL)
Excess Capacity
Perfectly elastic
Average Variable Cost (AVC)
14. The marginal utility from consumption of more and more of that item falls over time
Law of Diminishing Marginal Utility
Law of Supply
Average Product of Labor (APL)
Resources
15. TR = P * Qd
Dead Weight Loss
Price inelastic demand
Income Elasticity
Total Revenue
16. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus
Necessity
Price floor
Resources
Negative externality
17. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply
Marginal tax rate
Determinants of Supply
Accounting Profit
Price discrimination
18. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Average Total Cost (ATC)
Productive Efficiency
Total Revenue Test
Surplus
19. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Long Run
Income Effect
Demand for Labor
Necessity
20. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Necessity
Allocative Efficiency
Law of Supply
Price Elasticity of Supply
21. Total product divided by labor employed. APL = TPL/L
Marginal tax rate
Diseconomies of Scale
Determinants of Demand
Average Product of Labor (APL)
22. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials
Marginal Resource Cost (MRC)
Comparative Advantage
Variable inputs
Unit elastic demand
23. Ed > 1 - meaning consumers are price sensitive
Determinants of Demand
Economic Growth
Price elastic demand
Four-firm concentration ratio
24. Costs that change with the level of output. If output is zero - so are TVCs.
Market Economy (Capitalism)
Total variable costs (TVC)
Price elastic demand
Incidence of Tax
25. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Market power
Perfectly elastic
Excess Capacity
Consumer surplus
26. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Non-collusive oligopoly
Positive externality
Monopoly
Marginal Resource Cost (MRC)
27. Ei > 1
Marginal Cost (MC)
Constant cost industry
Perfect competition
Luxury
28. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Comparative Advantage
Marginal Benefit (MB)
Determinants of Demand
Marginal Productivity Theory
29. Demand for a resource like labor is derived from the demand for the goods produced by the resource
Derived Demand
Law of Demand
Production function
Specialization
30. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Economies of Scale
Relative Prices
Increasing Cost Industry
Substitution Effect
31. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Constant cost industry
Marginal tax rate
Total variable costs (TVC)
Economics
32. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Cartel
Marginal Product of Labor (MPL)
Monopolistic competition
Complementary Goods
33. The sum of consumer surplus and producer surplus
Total variable costs (TVC)
Total Welfare
Natural Monopoly
Long Run
34. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Derived Demand
Utility Maximizing Rule
Productive Efficiency
Increasing Cost Industry
35. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Producer surplus
Spillover costs
Monopoly
Oligopoly
36. The rational decision maker chooses an action if MB = MC
Least-Cost Rule
Shortage
Marginal Analysis
Resources
37. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Unit elastic demand
Price inelastic demand
Four-firm concentration ratio
Shortage
38. When firms focus their resources on production of goods for which they have comparative advantage
Specialization
Inferior Goods
Economies of Scale
Law of Increasing Costs
39. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Substitution Effect
Determinants of Supply
Least-Cost Rule
Economic Profit
40. The most desirable alternative given up as the result of a decision
Opportunity Cost
Excise Tax
Positive externality
Price floor
41. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run
Shutdown Point
Cross-Price Elasticity of Demand
Average Product of Labor (APL)
Perfectly competitive long-run equilibrium
42. The additional cost incurred from the consumption of the next unit of a good or a service
Non-collusive oligopoly
Market power
Marginal Cost (MC)
Long Run
43. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received
Negative externality
Constrained Utility Maximization
Consumer surplus
Decreasing Cost industry
44. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Law of Demand
Price inelastic demand
Spillover benefits
Short run
45. Ed = 0 - no response to price change
Marginal Resource Cost (MRC)
Perfectly inelastic
Perfect competition
Allocative Efficiency
46. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Total Revenue Test
Surplus
Income Effect
Determinants of elasticity
47. The output where ATC is minimized and economic profit is zero
Incidence of Tax
Monopoly
Unit elastic demand
Break-even Point
48. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Marginal Product of Labor (MPL)
Absolute Advantage
Normal Goods
Specialization
49. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Natural Monopoly
Perfect competition
Price Ceiling
Shortage
50. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Marginal Revenue Product (MRP)
Profit Maximizing Resource Employment
Least-Cost Rule
Diseconomies of Scale